‘Cost of trading, education’ restricting European retail - exchanges

The cost of trading and a lack of education is limiting the European retail trading market which is stuck using contracts-for-difference rather than futures and options like retail traders in the US, a panel of experts has suggested.

Speaking at the Trading Technologies conference in London on Thursday, a panel of exchange experts moderated by TT chief revenue officer Nick Garrow discussed the retail trading community, agreeing the US and Europe are very different.

Elena Patimova, director of derivatives sales at Cboe Global Markets, said: “The retail community is incredibly important for the exchanges and Cboe is no exception. We focus a lot on retail but we cannot deal directly with retail so we go via retail brokers and we try to make sure the retail brokers are well aware of the products and services that we are offering.”

Patimova went on to suggest the retail trading picture in Europe is “complex” compared with the US, citing the practice in Europe of payment for order flow as an issue.

She added: “Everyone knows that retail in Europe are not trading on exchanges, they are trading products not on exchange so that’s CFDs, warrants and certificates and that is the kind of thing that we as a group of exchanges are trying to solve.”

The Cboe director concluded by saying the cost of trading and data, and the lack of education in Europe are key hurdles to that market’s development.

Matthew Judge, European head of sales at SGX, agreed, adding: “The retail community is focused on the US and they are influenced by Twitter, Facebook and other media channels out there so it’s difficult for non-US exchanges to get some traction going which is why education has to be at the forefront of that.”

Judge continued: “For us, the positives are that Asia including China, Vietnam and South-East Asia are very retail-heavy but we have to make sure that we are doing it in a very controlled manner that makes MAS (Monetary Authority of Singapore) comfortable with what we are trying to do.”

Cboe Europe Derivatives has been at vanguard of efforts to encourage European retail trading of options, and has seen an uptick in volumes since onboarding retail broking giant Interactive Brokers in May.

The FIA European Principal Traders Association (EPTA) last week published a wide-ranging document that proposed recommendations to make Europe a more attractive place to trade, including simpler regulation and targeted reforms to increase transparency.